Can Africa be as prosperous as Nordic countries?
Leveraging Africa's ongoing awakening for economic success
Africa seems to be undergoing a long overdue awakening.
The coup in Niger, though probably ill-advised, was born of a need to take back control of the country's resources. Records show that France gets about 20% of its Uranium from Niger. Most of the Uranium is exported in its raw form, with little to no processing in Niger.
In Uganda, President Yoweri Museveni banned the export of iron ore, uranium, and timber for the same reasons. He cited an example that saw him reject a deal from an Indian company looking to mine and export iron ore.
If the deal had gone through, Uganda would have only made $47 per ton of iron ore while the Indian company would have made $700.
Elsewhere, Namibia and Zimbabwe banned the export of unprocessed lithium.
"Cabinet approved the prohibition of the export of certain critical minerals such as unprocessed crushed lithium ore, cobalt, manganese, graphite, and rare earth minerals." —Namibia's Information Ministry
The awakening inspires hope but raises a question: what next? How can Africa leverage this awakening to fuel prosperity?
African countries can draw inspiration from the Nordic model
Nordic countries consistently rank highly in almost all metrics that denote a high quality of life—democracy index, human development index, GDP, happiness, education, and countless more.
As of 2022, Norway, Sweden, Denmark, Iceland, and Finland—the Nordic quintet—were among the top 20 wealthiest countries. Data shows that all five countries laid the foundation for this level of economic success in the 1850s when they started to industrialize.
Africa seems to be in the same position—on the cusp of industrialization. Moreover, similar to how large deposits of natural resources aided in Nordic countries' industrialization journey, Africa has large deposits of natural resources that are relevant today.
Finland, Sweden, and Norway had extensive forests that could be turned into pulp, paper, and timber. Sweden had large iron ore deposits, while Norway and Iceland boasted large fish reserves.
All five countries had multiple energy sources, such as wind and hydropower in Denmark, Finland, Sweden, and Norway, and geothermal power in Iceland.
Africa is the top producer of critical minerals needed to power a global transition from fossil fuels to green energy. The transition is necessary to combat the climate change ravaging the world and build a sustainable future.
Some critical minerals include cobalt, copper, lithium, rare earth metals, chromium, and copper.
Still, history has shown that having natural resources is not enough. Knowing what to do with them is essential to the equation.
How did Nordic countries utilize natural resources effectively?
Nordic countries realized early on that they didn't have enough people within their borders to make the factories processing these natural resources profitable. So, they developed an open economy to make trade with other countries easy.
Open Economy: An economy that interacts freely with other economies worldwide.—Dictionary
They also recognized that populous countries that could serve as a market for their goods surrounded them. They developed relationships with these economies and sold raw materials to Germany, the UK, and Russia.
As more European countries industrialized, the Nordic countries also sold raw materials to those countries.
When tech advances in farming slowed down in the late 19th century, the Nordic countries adapted. They looked at what they had and decided that instead of exporting raw materials, they'd make manufactured goods with what they had.
Denmark produced a lot of food, so they created food processing industries. Sweden had iron, so they focused on steel manufacturing. The previously established open economies allowed these countries to export these manufactured goods to countries where producing these goods was too expensive.
That is why if you look at many large and successful Nordic manufacturing companies, you will realize they started operating at the end of the 19th century/beginning of the 20th century.
Good examples include:
Atlas Copco. A Swedish company founded in 1873. It manufactures industrial tools.
Novo Nordisk A/S. A Danish pharmaceutical company founded in 1921
AB Volvo. A Swedish car company founded in 1915
Equinor ASA. A Norwegian multinational energy company established in 1972
So, how can Africa replicate this?
1. Eliminate the economic isolation that exists between African countries
Togo's first president is famous for saying that the most heartbreaking legacy of colonialism was the economic isolation of people who lived side by side.
"Although I can call Paris from my office telephone here in Lome, I cannot call Nigeria, only 250 miles away. Railroads rarely connect at international boundaries, for example, Togo and Benin. Roads have been constructed from coast to inland, but few connect economic trade centers. The productive central regions of Togo, Benin, and Ghana are as remote from each other as if they were separate continents."
This economic isolation has hindered trade and industrialization in Africa for decades. It is time to borrow a leaf from Nordic countries and open the continent.
If Norway, Sweden, Denmark, Iceland, and Finland had not opened up their economies to each other and the rest of Europe, they wouldn't have gained access to the large European market that fueled industrialization.
Similarly, African countries must open the gates of accessibility—make it easy and affordable to move and trade with each other. It is the only way to reap the benefits of the 1.3 billion market on the continent and fuel industrialization that is bigger, if not similar to Nordic industrialization.
Luckily, the tool to facilitate this is already available in the form of the African Continental Free Trade Area (AfCFTA). The only pending thing is large-scale implementation, sensitization, and adoption.
2. Leverage AfCFTA to fuel specialization
Specialization is the foundation of international trade. Countries specialize in goods they can produce efficiently, produce a surplus, and trade them for another country's surplus goods.
From the beginning, Nordic countries were smart enough to realize straight-up competition would not work. As neighboring countries, it was inevitable that they would produce some similar goods and services, creating competing industries.
Instead of doubling down on similar products, each country prioritized one or two products with a comparative advantage. Take Finland, Sweden, and Norway. All three countries had extensive forests that could power paper, pulp, and timber industries.
However, Sweden chose to specialize in steel manufacturing because iron gave the country a comparative advantage, with timber processing coming in at a close second. Finland focused on the paper and pulp industries, while Norway doubled down on seafood, maritime, and hydropower.
Until today, Finland and Sweden are two of the main paper-producing countries in the world. On the other hand, Norway is the second largest producer of fish and fishery products globally.
Lesson? Competition is healthy, but specialization allows countries to corner the market in specific industries and set up the foundation for long-term economic success.
During an AfCFTA sensitization session, John Bosco Khalisa, the Executive Director of the East African Business Council, said that similar products were the biggest hindrance to increased trade in the East African Community.
The AfCFTA Secretariat noted the same and went out of its way to launch the African Trade Observatory (ATO).
The ATO offers an online dashboard that:
Compares information on market access and trade across countries
Provides information on each African country's ideal product/market combination.
3. Create a conducive environment for the establishment of industries
Banning the export of raw materials is a significant first step. Still, it amounts to nothing if the country does not offer a conducive environment for entrepreneurs in the continent to build businesses and factories that process the raw materials.
The Nordic countries of the time went out of their way to offer entrepreneurs incentives. They built the needed infrastructure, gave tax breaks, and built relationships with other countries to cultivate markets.
Take Sweden. In 1848, the country introduced the limited company law. The law allowed the state to limit the formation of limited companies. Between 1848 and 1860, the government rejected a lot of applications. 1860, the attitude changed, and by the 1870s, the state approved almost all applications.
It was a simple policy change, but it had a massive impact. Entrepreneurs founded companies in droves, and by 1872, limited companies employed 45% of all workers in Sweden. By 1912, that number rose to 80%. Is it a wonder that according to history, the Industrial Revolution in Sweden picked up speed in the 1870s?
African countries should emulate and implement equally impactful policy changes.
4. Invest in the African people
African countries have a terrible habit of forgetting that people are the drivers of a thriving economy—not the government, gold, diamond, lithium, or whichever resource a country has.
The countries hyper-focus on the resources and how the government can exploit them instead of incentivizing the people to harness them. This approach has failed over and over, but they keep doing it.
The most heartbreaking example is that of Ajakouta Steel Company in Nigeria. The project began in 1979, and as of 2022, 40 years later, the company is yet to produce even a tonne of steel. The Nigerian government has sunk over $8 billion into the project with zero returns. Reason?
The government was so focused on the iron and the promised benefits of steel manufacturing they forgot that creating a conducive environment for entrepreneurs to build multiple, probably smaller steel manufacturing companies would provide a better chance of success instead of the government taking on the project.
Most recently, Burkina Faso's new president stated that the government planned to build a factory to process lithium. Over 60 years after Africa first extricated itself from colonial rule, African leaders are making the same mistakes—even those claiming to be revolutionaries.
Time will tell if the Burkina Faso company will fare better than all the other African companies that came before it, but history has proven that will probably not be the case.
Data has shown that private companies often fare better than state-control companies.
A single government does not adapt to changes in the market as quickly as multiple small businesses
Governments lack continuity because of presidential terms. What one government started will not be prioritized by the subsequent government. This is one of the reasons Ajakouta Steel Company has never become operational.
Governments are not motivated to expand and profit as much as possible.
5. Improve the Nordic model and build a low-carbon industrial future from the ground up
Today, Nordic countries rank among the top 20 countries in renewable energy production. All five countries signed the Declaration on Carbon Neutrality—an agreement that will see them pursue net-zero emissions.
That has not always been the case. In 2010, Nordic countries ranked highly in carbon emissions per capita. Norway and Finland were ranked 24th and 26th respectively.
According to the Worldwide Fund for Nature (WWF's) scale, the ecological impact was relatively high at more than 2.7gha per capita. Such a high ecological impact means that the countries are consuming resources at a rate that would require several earths to sustain.
African countries have seen Nordic countries' damage to the environment and the effort and money spent transitioning to green energy. They should do one better and build a low-carbon industrial future from the ground up.
In all honesty, African countries do not have a choice. Africa is the continent that is most affected by climate change. As such, it must industrialize smarter. Is it a bit unfair? Absolutely. But any other route to industrialization will sink the continent faster than it can industrialize.
Luckily, African countries are loaded with renewable sources of energy.
Take Away
More factors contributed to the industrial revolution in the Nordic countries. That perfect confluence of favorable factors might be impossible to replicate. However, learning from what has worked for others is a great move.
At the very least, it starts you on your journey, and along the way, after you have learned enough, you can customize the process for maximum results.
Now, there are two different attitudes towards learning from others. One is the dogmatic attitude of transplanting everything, whether or not it is suited to our conditions. This is no good.
The other attitude is to use our heads and learn those things that suit our conditions, that is, to absorb whatever experience is useful to us. That is the attitude we should adopt." – Mao Zedong.
That, indeed, is the attitude.
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